Commentary and musings on the complex, fascinating and peculiar world that is securities regulation

Tuesday, October 11, 2011

President’s Jobs Council Urges Relief from Sarbanes-Oxley to Stimulate IPOs

In an effort to stimulate the IPO market, the President’s Council on Jobs and Competitiveness urged Congress to amend the Sarbanes-Oxley Act to allow shareholders of public companies with market valuations below $1 billion to opt out of at least Section 404 compliance, if not all of the requirements of Sarbanes-Oxley, or alternatively, exempt new companies from Sarbanes-Oxley compliance for five years after they go public. In an interim report, the Jobs Council also recommended a 10 percent capital gains tax for investors who buy stock in companies during the first six months after they go public and hold the stock for at least three years. This would encourage buy and hold investments particularly important for start-up companies. Also accredited investors that provide initial funding for companies would receive a 30 percent refundable tax credit.

Echoing earlier Administration statements, and against the backdrop of pending legislation, the Council said that smaller investors should be allowed to use crowdfunding platforms to invest small amounts in early stage companies.

The report urged Congress to pass legislation requiring the SEC, CFTC and other independent federal regulators to conduct a cost-benefit analysis for all new economically significant regulations or guidance that may have an annual impact on the economy of $100 million or more. Also, in order to ensure quality and accuracy, the legislation should require an objective third party with extensive qualifications and experience consistent with the agencies’ mandates to review the regulatory analysis conducted by the SEC and CFTC.